It’s a fact—most Americans have a lot of debt. 78% of Americans are living paycheck-to-paycheck and more than 1 in 4 workers do not set aside any savings each month.* Let’s break down where the most debt lies throughout the United States and discuss 5 life hacks to help attack your debt!
Types of Debt in America**
- Student Loans: The drastic rise of student loan debt is pretty shocking. The total student loan debt for the second quarter of 2019 was $1.48 trillion (up from $73 billion from the same time in 2018).
- Credit Cards: More than 189 million Americans have credit cards and the average card holder has at least 4 credit cards. On average, each household with a credit card carries $8,393 in credit card debt alone.
- Auto: Total automobile debt for the second quarter of 2019 was $1.3 trillion. That’s a HUGE jump from $59 billion from the same time in 2018!
- Home: Mortgage debt has risen across the U.S. to $9.4 trillion, which is a good thing. This means the housing market is recovering from the recession 10 or so years ago. This is due to interest rates remaining low and rising home prices.
Still with us? Now that you know the types of debt that are out there, let’s look at 5 life hacks to keep debt under control:
- Set goals and a strategy. Paying off your debt is a goal so make sure you keep that objective in front of you. It’s important to map out a strategy and stick to it. Make a list of your debts from smallest to largest (interest rate doesn’t matter here).
- Set a budget in place. Budgeting is one of the most important things you can do when you’re paying off your debt. You’ll see where all your money is going and can figure out where you can cut back on extra expenses. Once you have a handle on the money coming in and out of your account, start making the minimum payment on all your debts (except the smallest one). Pay as much as you can on your smallest debt and repeat until each debt is paid in full.
- Don’t make the same mistakes again. Set up an emergency fund to protect yourself from unplanned bills. Your emergency fund ideally would have 3-6 months of cash to cover expenses but start with $1,000. 39% of adults can’t cover a $400 emergency*** so building up this emergency fund is a vital life hack. Stay motivated—you’ve got this!
- Don’t accept bad advice. Everyone has an opinion, so this is an important life hack to remember for all facets of your finances—especially if you’re looking to purchase a new home. Buying a house is a big deal and will likely become your largest asset so make sure you get on a smarter mortgage plan. You need to know the true cost of buying and owning a home to help you stay within your budget, so you can get out of debt as soon as possible. The decisions you make today will affect tomorrow, so make smart choices!
- Be a smart home buyer. This life hack can make all the difference when home shopping! Not everyone can pay cash for a home. Make sure you choose a lender, like Churchill Mortgage, that can help you get on the fastest path to debt-free homeownership. It’s something we’re passionate about (we’re a debt-free company!) and want to be your guide throughout your home buying process. There's no need to fall into one of the typical mortgage traps that people often fall for!
We all have life goals and it’s important to ensure that debt doesn’t interfere with those goals. Take some time to figure out how you can beat debt and stay in control of your finances—you’ll be glad you did! If you have any questions about buying a home (or how to avoid mortgage traps), reach out to a Churchill Home Loan Specialist near you! We’re happy to help guide you in the smarter direction!